Pfizer Inc. Earnings Call Nuggets: Share Repurchase, Nutri Proceeds
On Tuesday, Pfizer Inc (NYSE:PFE) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared with analysts and investors.
Catherine Arnold – Credit Suisse: Actually I have two questions, I want to ask you about your comments on share repurchase, I know you guys always talk about share repurchase is the case to beat, and I think that we obviously have a lot of subjectivity in thinking about that in terms of what your stock price is now, and where it will be and when that changes. But is it fair to think about it from an earnings yield perspective when you think about consensus numbers divided by your share price you’re yielding 10%, and that seems like a pretty high number to beat and actually even a $1 or $2 from here, same deal, so is that a fair way of thinking about it, and then my more granular question on Tofa, could you just comment on where the ORAL Start study is in regards to interim analysis reading out this year, if FDA has that in terms of its review and the same think with ORAL Scan?
Ian Read – Chairman and CEO: Thank you, Catherine. Yeah, I’ll ask Frank to comment on the way you look at share repurchases, but I’d just like to (one thing and) emphasize that we remain committed to disciplined in capital allocation and we do see our shares as being a good investment and a high hurdle to beat and we remain committed to looking for opportunities with sort of bolt-on acquisitions that would produce growth but they always have to be what we believe is the high hurdle of our share repurchase.
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Frank D’Amelio – EVP, CFO and Business Operations: Catherine, I think the way I’d answer the question is, we don’t look at any individual metric. We look at several metrics. At a macro level, we always start with at prevailing market conditions and therefore prevailing market stock prices to we believe that buying back our shares represents an attractive investment opportunity and the prudent use of capital. The short answer is, we do. So, start there. Then we look at a few other metrics, one of which is the one you mentioned in terms of an EPS number on top of the stock price and the return you get and then probably that’s an after-tax return that needs to be trued up to a pre-tax number which gets you to the high hurdle comment that Ian made earlier on the phone call. So, that is one of the other metrics that we do look at when we analyze the return on share buybacks.
Ian Read – Chairman and CEO: Geno, would you answer the Tofa question?
Geno Germano – President and General Manager, Specialty Care and Oncology: Yes, Catherine, for the Tofa trials, the ORAL Scan trial, the one-year readout was included in the dossier that went to the FDA. So, they have the data, the one-year data. The two-year data will read out a little bit later this year and whether we submit that data to the FDA or nor prior to an action will depend on ongoing discussions with the agency. In terms of the monotherapy trial, that also the one-year data will read out around middle of this year as well and that has not obviously been submitted as a part of the dossier since it hasn’t read out yet and so those data will be available as we progress through the rest of the year.
Jami Rubin – Goldman Sachs: Just to follow-up on Catherine’s questions, Ian, I don’t mean to put words in your mouth, but do you see any other acquisition out there that is more attractive right now than buying back your stock, and then Frank maybe if you can talk about the proceeds from the Nutritionals business as I understand are mostly outside the U.S., and what can you do to minimize the tax burden when you take that cash back from overseas to the U.S.? And then lastly Geno, if you could just frame for us the issues going into the panel on Wednesday for Tofacitinib and just generally how you’re feeling about the potential outcome?
Ian Read – Chairman and CEO: So, I think, we’ve said many times that we as we look at opportunities especially in smaller bolt-on opportunities where we could acquire an asset that we could organically grow. We would be interested in that because we do want to look at growth assets. I certainly don’t – I look at them as bolt-on, and I don’t – as I sit here today don’t see any of those type of activities, and certainly I would say, well, never say never. I certainly don’t see any opportunity in larger scale acquisitions that would be a prudent use of our capital. Chuck do you want to add to that?
Charles E. Triano – IR: Yeah. So, let me hit the question on the Nutri proceeds, Jami. Let me just start at a high level, then I’ll drill down a little bit. So, first we are pleased with our recent announcement to sell the Nutri business to Nestle. We look forward to working with Nestle to get that transaction completed by the first half of 2013. In terms of the proceeds in my mind nothing has changed, we are all about working to continue to minimize – to maximize the after-tax return to our shareholders. In terms of the use of the proceeds, nothing has changed and share buybacks remain the case to beat. Then specifically now to your question, when we do receive those proceeds initially most of those proceeds will be domiciled outside the U.S. because out Nutri business was a non-U.S. business. Then in terms of what is our objective? Our objective is to minimize the tax burden involved in those proceeds as we maximize the share repurchases from those proceeds. That’s literally what we are working off our way through as we go.
Ian Read – Chairman and CEO: Thank you, Frank. Geno?
Geno Germano – President and General Manager, Specialty Care and Oncology: Jami, this is Geno. So let me make some comments about Tofa. I think with regard to our expectations for the advisory committee and the issues. I mean, it’s basically all about benefit risk and I think there will be a thorough discussion of both and we feel that our data package is strong with regard to characterizing both the benefits and the risks associated with this medicine. On the efficacy side, we’ve done five large pivotal trials, we have a database of over 4,800 patients. We have shown consistent efficacy in signs and symptoms and function and remission. We have structured data in the ORAL Scan study and importantly we have strong patient reported outcomes data that showed patients actually function better and they feel better actually on this therapy. So on the benefit side, we think the benefits are really well characterized. On the risk side, this is a new mechanism of action, so there will be lots of interest in understanding the profile thoroughly. The good news is that – what we’ve seen in our clinical trials with regard to adverse events and safety issues are predictable based on the mechanism of action, you can almost anticipate what might be the case. What we’ve seen in the safety profile is that it is predictable. The safety events are familiar to rheumatologist, they’re manageable in most cases, and we think that after a thorough and robust discussion the advisory committee will have the data to conclude that the benefit risk is positive at both at the 5 milligram and 10 milligram dose, which is what we’ve concluded. We think the fact that this is a first ORAL DMARD in over 10 years, and given the high unmet medical need for patients with RA, that the committee will be favorable and the discussions will be robust.
Ian Read – Chairman and CEO: Thanks, Geno. Next question please operator.